Archive for July, 2009

Here is an excellent analysis from The Wall Street Journal.
“The average length of unemployment is higher than it’s been since government began tracking the data in 1948.

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:

– June’s total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

– More companies are asking employees to take unpaid leave. These people don’t count on the unemployment roll.

– No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn’t searched for work in the four weeks preceding the survey.

– The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

– The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That’s 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

– The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.”

To read the full article, click here.

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Steven R. Gerbsman, Principal of Gerbsman Partners, Kenneth Hardesty and Dennis Sholl, members of Gerbsman Partners Board of Intellectual Capital, announced today their success in maximizing stakeholder value at Pegasus Biologics Inc., a venture capital backed medical device company. Pegasus Biologics focuses on the development of advanced biologic solutions. Applications range from the repair, augmentation, reinforcement and reconstruction of soft tissues to advanced wound management.

Gerbsman Partners provided Crisis Management leadership, facilitated the sale of the business unit, associated Intellectual Property and assets and recovered receivables. Due to market conditions, the senior lender and the board of directors made the strategic decision to maximize the value of the business unit and Intellectual Property. The senior lender recovered 100% of its principal.

Gerbsman Partners provided leadership to the company with:

  • Crisis Management and medical device expertise in developing the strategic action plans for maximizing value of the business unit, Intellectual Property and assets;
  • Proven domain expertise in maximizing the value of the business unit and Intellectual Property through a targeted and proprietary “Date Certain M&A Process”;
  • The ability to “Manage the Process” among potential Acquirers, Lawyers, Creditors Management and Advisors;
  • The proven ability to “Drive” toward successful closure for all parties at interest.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 55 Technology, Life Science and Medical Device companies and their Intellectual Property and has restructured/terminated over $770 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.2 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, San Francisco, Europe and Israel.

For additional information please visit www.gerbsmanpartners.com.

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By Ronald H. Coelyn, Founding Managing Partner – The Coelyn Group

I recently read an article in a major newspaper purporting to give advice about recruiting executive talent in today’s extremely challenging economic climate.  Frankly, the advice given by these so-called experts in both print and broadcast media is unsubstantiated nonsense and very misleading – giving the distinct impression that their stories represent the “real” world.  It doesn’t work that way!

Myth 1 – Hiring only the “employed” in the current economy: The theory behind this statement is that unemployed executives are not as qualified as those who are employed.  This tried and “true” belief is untrue – most especially today.  In more than 23-years of executive search consulting I’ve never seen so many exemplary candidates become available through no fault of their own.  My firm would and has presented “A” player candidates who were currently between assignments.

Myth 2 – Age matters; don’t hire candidates in the third third of their career: This statement basically says that executives have about a 45-year career timeframe (from age 21 to age 65) prior to retirement.  But in reality, health, energy, passion and desire are the key components in evaluating a candidate of any age. More to the point, recent studies have shown that the average stay for a senior level executive is 2.3 years (reflecting the challenges of senior management, M&A activity, etc.). So hiring someone with perhaps 15 or more years left in their career, or even 3-4 years, should never be a problem.  And I would seriously consider candidates beyond age 65 assuming they have the aforementioned energy, etc.

Myth 3 – Wealthy executives don’t want to work anymore: they can’t be motivated: Clearly, this is an individual decision and many executives who have become independently wealthy elect to retire.  But I have personally come to know a great many such fortunate executives who have decided to continue their business careers. They just love the process, the thrill of competition and the realization that their contributions are truly important to society.

A perfect example is the venture capitalists.  As a group these creative leaders have often amassed considerable wealth and yet they “remain steadfastly in the game.”  And notwithstanding the current economic crisis which is impacting their sector we all know that they will come back strong, albeit perhaps with a different model for conducting business – but raise new funds and invest they will.  Of that, you can be certain.

Ronald H. Coelyn – Founding Managing Partner, The Coelyn Group
Ron is the Founding Partner of The Coelyn Group which specializes in Healthcare and Life Sciences. For the past 17 of his 30-year career, he has been active in these industries as a senior executive officer and, most recently, as an executive search consultant (both as a Founder of this Firm and as a Partner in the prestigious international executive search firm SpencerStuart). His executive search consulting practice spans engagements ranging from Chairman of The Board, Members of The Board of Directors, President & Chief Executive Officer to a variety of Vice Presidential and other senior level executive positions.

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Here is an excellent article I found at NY Times blog section.

“For a group accustomed to looking outward for the next big thing, Silicon Valley’s venture capitalists are getting very introspective these days, The New York Times’s Claire Cain Miller writes.

Much of the soul searching along Sand Hill Road in Menlo Park, where many of the venture capitalists have offices, is leading to the same conclusion: venture capital needs to go back to basics. The biggest names in the industry are concerned about low returns and are blaming several factors: funds that have grown too large, the M.B.A.’s that have invaded the industry and older partners who have lost touch with what is new in technology.

“I personally believe and I think the evidence proves that the venture industry has gotten too big, the funds have gotten too big,” said Alan Patricof, an investor for 40 years, who backed America Online and Apple, at a recent venture investing conference in San Francisco. “Our biggest challenge today for venture capital is to think smaller.”

Mr. Patricof is part of a growing chorus of voices calling for the amount of money in venture funds to shrink drastically to levels last seen two decades ago. His firm, Greycroft Partners, is taking a retro approach with a $75 million fund that makes smaller investments.

Many in the industry predict that a third to a half of the 882 active venture capital firms could disappear, if only because poor returns will force underperformers to shut down. It is already happening: Investment in venture capital funds shrank to $4.3 billion in the first quarter, from $7.1 billion in the same quarter a year ago.

There will be “a ton of venture capitalists who disappear over the next 18 to 20 months, and it’s going to be painful for a while,” Bryan Roberts, a partner at Venrock, told The Times. “But the best thing that could have happened to V.C. is this economic crisis, because it’s lowering the flow of capital into these funds.”

Read the full article here.

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Here is a good reflective article from CNN on the art of mergers – and it´s possible pitfalls.

“(Fortune Magazine) — David Crane, CEO of NRG Energy and a father of five, was standing in a stubby cornfield in Bucks County, Pa., one windy evening last October when his BlackBerry began to stir. He checked his in-box, but he didn’t respond, not right away. It was Sunday night, and he was on an outing with his family, waiting in line for a Halloween hayride. Nor did he respond an hour later on his way to the Amtrak station to catch a train to Washington, D.C. How could he, when he drives a Mini Cooper with a stick shift? You need both hands to manage a car like that. So it wasn’t until after nine at night, having found a quiet corner of the waiting room behind a Dunkin’ Donuts kiosk, that Crane finally got around to calling back John Rowe.

Rowe, CEO of Exelon Corp. (EXC, Fortune 500), picked up Crane’s call at his big-windowed aerie in Chicago’s Chase Tower, 54 stories above the Loop. Rowe told Crane that his board had met that afternoon, and he had some news: Exelon, the country’s biggest electric utility, was hereby offering to buy NRG (NRG, Fortune 500), the country’s fastest-growing independent electricity merchant — it sells wholesale power to utilities — for stock in a deal worth $6.2 billion. Term sheet to follow, press release within the hour. “Offer” was a euphemism; this was a hostile act.

Crane was stunned, less by Rowe’s uninvited bid (his lust for NRG was no secret) than by his choosing to publicize it instantly. Protocol dictates that a classic bear hug, as the M&A world defines the ritual, begin with a warm embrace, in private, with an eye toward achieving mutual consent. Rowe wasn’t even pretending to be nice. Crane could imagine why. NRG was secretly pursuing two deals of its own with Houston-based power companies: one code-named Doris, for Dynegy (DYN), the other Rodeo, for Reliant. Either would create regulatory obstacles that could block Exelon. Somehow Rowe had gotten wind of them. Neither was imminent, Crane says now (“He had a lot more time”), but Rowe didn’t know that.

Their conversation lasted only a few minutes. Crane asked Rowe if he had his debt financing in place. Both men understood that a change of control would trigger an immediate requirement to pay down $8.5 billion in NRG loans. “Not yet,” said Rowe, “but we’re working on it.” Crane wanted nothing to do with this deal: not with Rowe, whom he barely knew; not with Exelon, which he views as stodgy, bureaucratic, and otherwise “ill suited” to run an entrepreneurial enterprise like NRG without “suffocating” it; and definitely not at that price, which he would soon be describing to anyone who would listen as tantamount to “stealing the company.” Nevertheless, he tried to be civil as he concluded the call, promising Rowe, “We’ll give this serious consideration.”

So much for his scheduled trip to Washington. Crane called Jonathan Baliff, NRG’s M&A specialist, and reached him at home. “You’re not gonna believe this,” he said, still not quite believing it himself. “John Rowe just called to wish me a happy Halloween.”

Click here for the whole article.

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